In November 2021, Glass Lewis published its 2022 Policy Guidelines containing updates, codifications and clarifications for policies relevant to U.S. companies. In addition, Glass Lewis also published updates to its global Environmental, Social & Governance ("ESG") guidelines which includes new policies, as well as codification and clarification of existing policies.

The updated Glass Lewis' guidelines are available through its policy page, and a press release can be found on the Glass Lewis blog.

Many of the policies outlined in the November 2021 document are applicable immediately to annual meetings held on or after January 1, 2022. Glass Lewis has also provided outlook for policies that will go into effect in 2023.

US Policy Updates, Codifications and Clarifications

UPDATES TO EXISTING POLICIES

Board Gender Diversity

This year, Glass Lewis has replaced references in its guidelines to female directors with “gender diverse directors,” which they define as women as well as directors that identify with a gender other than male or female.

Glass Lewis has expanded its policy on gender diversity such that it will generally recommend against the chair of the nominating committee at companies with fewer than two gender diverse directors, beginning with meetings held after January 1, 2022. This policy applies to companies in the Russell 3000 index.

Glass Lewis has further expanded its board diversity policy stating that beginning with meetings held after January 1, 2023, they will shift away from a fixed numerical approach, applicable to meetings in 2022, to a percentage-based approach. Starting in 2023, Glass Lewis will generally recommend voting against the nominating committee chair at companies in the Russell 3000 index where boards are not at least 30% gender diverse.

State Laws on Diversity – Gender and Underrepresented Communities

In 2021, Glass Lewis added a policy to recommend in accordance with board diversity composition requirements dictated by state law, where applicable. This year they have added a section describing how they will generally recommend in line with state laws mandating board composition requirements for underrepresented community diversity or other diversity measures beyond gender.

Disclosure of Director Diversity and Skills

Beginning in 2022, for S&P 500 companies with “particularly poor” diversity disclosure, Glass Lewis may recommend voting against the chair of the nominating and/or governance committee. Further beginning in 2023, when companies in the S&P 500 index have not provided “any disclosure of individual or aggregate racial/ethnic minority demographic information,” they will generally recommend against the chair of the governance committee.

Environmental and Social Risk Oversight

For the 2021 U.S. proxy season, Glass Lewis updated it guidelines to note as a concern in Proxy Papers for S&P 500 companies those that do not provide "clear disclosure concerning the board-level oversight afforded to environmental and/or social issues." This year, they have expanded the application of policy to note such a concern to companies in the Russell 1000. Further, for meetings held after January 1, 2022, Glass Lewis will generally recommend against the chair of the governance committee at S&P 500 companies where such disclosure is lacking.

Age and Tenure Policies

Glass Lewis has revised its approach to boards waiving self-imposed age and/or tenure policies. Beginning in 2022, where companies have waived board term/age limits for two or more consecutive years, Glass Lewis will recommend against the nominating and or governance committee chair.

Multi-Class Share Structures

Beginning in 2022, Glass Lewis will recommend voting against the chair of the governance committee at companies with a multi-class share structure and unequal voting rights when the company does not provide for a reasonable sunset (generally seven years or less) of the multi-class share structure.

NEW POLICIES

Stock Exchange Diversity Disclosure Requirements

Glass Lewis has adopted a new policy relating to Nasdaq Stock Market’s recently adopted diversity disclosure listing rules. For annual meetings of applicable Nasdaq-listed companies held after August 8, 2022, Glass Lewis will recommend voting against the chair of the governance committee when the required diversity disclosure has not been provided. Details about Nasdaq’s diversity disclosure requirements can be found here.

Governance Following a Business Combination with a Special Purpose Acquisition Company (SPAC)

Glass Lewis has added a new section to address governance at SPACs. Glass Lewis views the business combination of a private company with a SPAC as representing “the private company’s de-facto IPO” . Accordingly, beginning in 2022, in cases where Glass Lewis determines that the newly public company has adopted overly restrictive governing documents and, preceding the company becoming publicly traded, the board adopted a multi-class share structure or an anti-takeover provision (such as a poison pill or classified board), they will generally recommend voting against all members of the board who served at the time of the company becoming publicly traded if the board did not:

(i) submit provisions to a shareholder vote at the prior meeting where shareholders voted on the business combination;

(ii) commit to submitting these provisions to a shareholder vote at the company’s first shareholder meeting following the company becoming publicly traded; or

(iii) provide for a reasonable sunset of these provisions

Glass Lewis has also added in a new discussion about director commitments for SPACs. Specifically, Glass Lewis noted that when a directors’ only executive role is at a SPAC, they will apply a higher limit for company directorships. Generally, Glass Lewis will recommend against a director who serves in an executive role only at a SPAC while serving on more than five public company boards.

POLICY CLARIFICATIONS

Short- and Long-Term Incentives (clarification)

Glass Lewis has clarified its guidance related to its analysis of the short-term incentive awards to note that it will consider adjustments to GAAP financial results in its assessment of the incentive’s effectiveness at tying executive pay to performance.

Governance following an IPO, Spin-Off, or Direct Listing (clarification)

Glass Lewis has clarified its approach to post-IPO governance-based director recommendations to include reference to companies that have gone public by way of direct listing. Glass Lewis will apply the same approach as its existing policy on IPOs and spin- offs when examining the company’s governance.

Director Independence (clarification)

Glass Lewis has added a sentence clarifying that for material financial transactions, they apply a three-year look back, and for former employment relationships, a five-year look back.

Related-Party Transaction Materiality Thresholds (clarification)

Glass Lewis has added a sentence clarifying that the $50,000 threshold for individual transactions also applies to directors who are the majority or principal owner of a firm that receives such payments.

ESG Initiatives Updates, Clarifications and Codifications Say on Climate (Clarification)

Glass Lewis has clarified its approach to management and shareholder say on climate proposals, detailed below:

Management-sponsored: Glass Lewis will look to the company board to provide disclosure on the plan for governance of the Say on Climate vote. In instances where disclosure is not apparent, Glass Lewis will either recommend shareholders abstain or vote against the management proposal. Regardless of such governance, Glass Lewis will evaluate the quality of the climate transition plans presented by companies on a case-by-case basis.

Shareholder-sponsored: Glass Lewis will generally oppose shareholder proposals requesting that companies adopt a Say on Climate vote. Glass Lewis will evaluate companies’ climate transition plans on a case-by-case basis. They will also consider companies’ disclosure of the board’s role in setting company strategy in the context of the proposal, as well as disclosure on how the board intends to interpret the vote results. The 2022 ESG policy guidelines note that Glass Lewis is supportive of companies providing disclosure concerning climate related risks and opportunities and will apply the policies designated in their “Climate Reporting” guideline.

Environmental and Social Risk Oversight (Update)

In 2021, Glass Lewis updated its ESG Initiatives guidelines with a policy to note as a concern instances where boards of large cap companies do not provide "clear disclosure concerning the board-level oversight afforded to environmental and/or social issues." This policy went into effect this year. Beginning in 2022, Glass Lewis will now also be examining mid cap companies that do not provide the aforementioned E&S disclosure. Glass Lewis will generally recommend against the governance chair of a company that fails to provide clear disclosure concerning oversight.

Written Consent (Codification)

Glass Lewis has codified its approach to written consent shareholder proposals. They will generally recommend in favor of lowering the ownership threshold when the company has no special meeting provision, or only allows shareholders owning more than 15% of its shares the ability to call a special meeting. Further, Glass Lewis will generally oppose lowering the ownership threshold necessary to initiate written consent if the company in question has a 15% or lower special meeting threshold.

Relevant updates to Glass Lewis Proxy Paper research reports

  • BitSight Security Ratings: In response to growing investor concerns around board and management oversight of cyber risk, in September 2021, Glass Lewis announced it would be adding cybersecurity risk ratings provided by BitSight to its Proxy Paper research reports. According to Glass Lewis, “BitSight’s Security Ratings and data will supply Glass Lewis clients with data-driven, evidence-based cybersecurity intelligence, which, in turn, will provide new visibility into a dimension of company performance and governance.” An official Glass Lewis press release detailing this announcement found here.
  • Arabesque S-Ray: In October 2021, Glass Lewis announced a strategic partnership with Arabesque S-Ray in which S-Ray ESG data and insights would be included in Glass Lewis According to Glass Lewis, “The partnership will see Arabesque provide company ESG profiles for Glass Lewis’ Proxy Paper research reports, enabling clients to gain the latest ESG data and insights on over 8,000 companies worldwide, and access to climate and regulatory data solutions. Using big data and a quantitative, algorithmic approach, Arabesque’s capabilities draw on more than four million ESG data points daily from over 30,000 sources for performance metrics on sustainability, including corporate net-zero alignment.” An official Glass Lewis press release detailing this announcement found here.

If you are curious to what extent Glass Lewis recommendations — or those of other proxy advisory firms — impact the voting decisions of your particular shareholders, reach out to your Georgeson representative, email info@georgeson.com or call us at 212 440 9800.

Glass Lewis has published a specific document covering ESG initiatives worldwide. Learn more about the aspects most relevant to companies in the UK & Continental Europe.